Peace River Hydro Partners, Acciona Infrastructure Canada Inc., Samsung C&T Canada Ltd., Acciona Infraestructuras S.A. and Samsung C&T Corporation v. Petrowest Corporation and others

At a glance

Parties

Peace River Hydro Partners, Acciona Infrastructure Canada Inc., Samsung C&T Canada Ltd., Acciona Infraestructuras S.A. and Samsung C&T Corporation (appellants) v. Petrowest Corporation, its affiliates, and Ernst & Young Inc. as court-appointed receiver and manager (respondents)

Case no.

Supreme Court of Canada, Docket 39547; 2022 SCC 41

Court

Supreme Court of Canada (Wagner C.J. and Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin, Kasirer and Jamal JJ.)

Forum and rules

Stay application under s. 15 of the British Columbia Arbitration Act, R.S.B.C. 1996, c. 55; Bankruptcy and Insolvency Act ss. 183(1), 243(1); New York Convention art. II(3) cited

Sector

Construction; hydroelectric dam (Site C Project); insolvency

Outcome

Appeal dismissed with costs throughout. The arbitration agreements are inoperative, so the receiver's civil claim may proceed in the Supreme Court of British Columbia. All nine judges agreed on the result; Jamal J. (with three others) concurred on a different primary ground.

The dispute

Peace River Hydro Partners is a partnership formed to design and build the Site C hydroelectric dam on the Peace River in northeastern British Columbia. Its members include Canadian subsidiaries of Acciona and Samsung C&T, and Petrowest. From December 2015, Peace River subcontracted work to Petrowest and its affiliates. The partnership agreement, the guarantee, the purchase orders and a subcontract contained differently worded arbitration clauses, some of them under the ICC Rules with the seat in Vancouver. Petrowest entered receivership on 15 August 2017 by order of the Alberta Court of Queen's Bench under s. 243(1) of the Bankruptcy and Insolvency Act (BIA), and Ernst & Young Inc. was appointed receiver. The receiver sued Peace River in the Supreme Court of British Columbia for amounts allegedly owed for the subcontracted work. Peace River applied to stay the claim under s. 15 of the Arbitration Act. The receiver argued that the BIA allowed the court to keep the dispute in a single judicial process.

Key holdings

1. Section 15 of the Arbitration Act does not require a court to stay, in every case, a claim brought by a court-appointed receiver that falls under a valid arbitration agreement. A court may refuse a stay where the agreement is "void, inoperative or incapable of being performed" under s. 15(2), including where arbitration would compromise the orderly and efficient resolution of a court-ordered receivership. ¶¶ 7, 34
2. Stay applications follow a two-part framework. First, the applicant must show an arguable case on four technical prerequisites. Second, the party resisting arbitration must prove on a balance of probabilities that a statutory exception applies, and only in a clear case. A court may decide jurisdiction ahead of the arbitrator, consistent with competence-competence, on questions of law, or of mixed fact and law that need only a superficial review of the record. ¶¶ 42–43, 76–89
3. A court-appointed receiver can be a "party" to the debtor's pre-receivership arbitration agreement under ordinary contract law, because it claims through or under the debtor. Undertaking to file a defence, or asking for an extension of time to file one, is not a "step in the proceedings". ¶¶ 97–118, 157
4. A receiver cannot unilaterally disclaim an arbitration agreement and so make it void, inoperative or incapable of being performed; only a court can make that finding. The Court of Appeal erred in relying on disclaimer and on the separability doctrine. ¶¶ 119–125, 166–168
5. Sections 183(1) and 243(1)(c) of the BIA give a statutory basis to find an arbitration agreement inoperative in a receivership, so the court need not rely on inherent jurisdiction, and no paramountcy conflict arises. The relevant factors are: the effect of arbitration on the integrity of the insolvency proceedings, the relative prejudice to the parties, the urgency of resolving the dispute, any applicable insolvency stay, and any other material factor. ¶¶ 146–156
6. On the facts, the agreements are inoperative. The receiver would have to fund at least four arbitrations involving seven sets of counterparties, with possible parallel court claims and a risk of conflicting outcomes. Peace River showed no prejudice and conceded that a single court process would be faster and cheaper. ¶¶ 173–180
7. Concurrence (Jamal J., with Karakatsanis, Brown and Martin JJ.): paras. 3(c), 3(f) and 3(j) of the Receivership Order authorised the receiver to disclaim the arbitration agreements and sue in court, which made them inoperative. In the alternative, the concurrence agreed with the majority's analysis under the BIA. ¶¶ 190–198

Procedural history

1. 17 December 2015Partnership Agreement and Guarantee executed; both contain arbitration clauses.
2. 15 August 2017Petrowest enters receivership under an Alberta Court of Queen's Bench order; Ernst & Young Inc. appointed receiver.
3. 3 April 2018The receiver assigns the Petrowest affiliates into bankruptcy and becomes their trustee in bankruptcy.
4. 29 August 2018The receiver files a civil claim against Peace River in the Supreme Court of British Columbia.
5. 2019Chambers judge (Iyer J., 2019 BCSC 2221) dismisses Peace River's stay application, relying on inherent jurisdiction flowing from s. 183 of the BIA.
6. 2020British Columbia Court of Appeal (2020 BCCA 339) dismisses the appeal on the ground that the receiver was not a party to the arbitration agreements and had disclaimed them under the separability doctrine.
7. 19 January 2022Appeal heard by the Supreme Court of Canada.
8. 10 November 2022Judgment: appeal dismissed with costs throughout.

Tribunal, counsel and experts

For the claimant

Burnet, Duckworth & Palmer

For the respondent

Bennett Jones LLP

For other participants

Spiegel Sohmer inc. · Lerners · Baker & McKenzie · Fasken Martineau DuMoulin LLP · Canadian Federation of Independent Business

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Keywords

• stay of proceedings
• inoperative arbitration agreement
• incapable of being performed
• New York Convention art. II(3)
• receivership
• Bankruptcy and Insolvency Act
• insolvency and arbitration
• competence-competence
• separability
• disclaimer
• non-signatory
• step in the proceedings
• single proceeding model
• Site C Project
• hydroelectric dam
• British Columbia Arbitration Act
• Acciona
• Samsung C&T

Summary generated with AI from the published documents — refer to the award for the authoritative text.